Restructuring Istanbul: Historical City, Modern ‘Profitpolis’ and Byzantine Risk Management Financial Infrastructure
Lydie Pierre-LOUIS
“Risk is like fire: If controlled it will help you; if uncontrolled it will rise up and destroy you.”1
I. INTRODUCTION
Turkey is writing a new chapter in its history. It is a chapter focused on risks and uncertainties inherent with rapid economic growth of a potential global emerging market, which may soon include Turkey within the same level of commercial privatization as the BRIC (Brazil, Russia, India and China)2 emerging economies of which foreign investors are enamored. Istanbul’s economic growth can be attributed to extensive migration into the city Istanbul, brisk property valuation, increased global commercial activity, short-term debt coverage and risk management. Turkey’s risks and uncertainties are amplified when foreign investors calculate that Istanbul is located very near the North Anatolian Fault Zone that runs within less than a mile from the city through the Sea of Marmara. The discussion is then recalibrated to concerns regarding public expectations of government in preparedness and recovery in times of natural disaster. In particular, a central bank’s response to financial disaster, compared to actual government and private sector preparedness, as well as effective capabilities to protect returns on investments, but human capital—and human lives. Istanbul’s financial preparedness and recovery is being discussed in boardrooms, in government committees and in the proverbial streets of Taksim Square.3 Foreign investors are aggressively pursuing returns on their investments while the Turkish Government and the world have begun to focus on fiscal policies that will guide Turkey’s market driven economy through inevitable natural disasters such as earthquakes and floods as well as domestic and financial banking uncertainties, risks and disasters.4 The Turkish Government has issued fiscal policies and rules, which are anticipated to decrease public debt, attract foreign direct investments and increase the global competitiveness of Turkey’s banking sector. However, one area is particularly weak with regard to Turkey’s financial policies—Turkey’s risk management financial infrastructure especially in the context of disaster preparedness and recovery.
The global financial crisis has forced Turkey like many other countries to closely monitor financial market infrastructure and to implement financial protocols to limit risks and accomplish some measure of financial stability. Turkey’s financial sector is primarily comprised of Turkey’s banking sector. A major disruption in the banking sector would ripple through the financial sector and the economy, overwhelming Turkey’s financial risk management structure and devastating the economy. As such, Turkey has adopted the Capital Market Law to regulate payment and securities settlement systems, payment systems and electronic money institutions.5
